Gross margin increased by 5 percentage points against the trend, COSMO LADY (02298) stands at the starting point of "revaluation" of value.

On August 28 at 16:30, in Hong Kong, at the COSMO LADY (02298) interim performance meeting, outside the floor-to-ceiling windows was the sultry Victoria Harbour, while inside the conference room the air conditioning was ample, creating a lively atmosphere: investors, analysts, and media from Shenzhen and Hong Kong, along with a batch of shareholders in the online live room, all anticipated an analysis of the "counterintuitive" numbers behind the statement "revenue is shrinking, profits are rising, and gross margins are increasing." Four hours before the meeting, COSMO LADY released its mid-year financial report for 2026: revenue reached 1.267 billion yuan, a year-on-year decrease of 11.8%; net profit attributable to shareholders was 61.214 million yuan, a year-on-year increase of 5.9%; and the gross margin was 51.4%, up by approximately 5 percentage points year-on-year. 27.3 billion and 70 billion: Restructuring the online track What truly made investors sit up straight was the data from e-commerce. Zhang Shengfeng, Executive Director and Vice President of COSMO LADY, presented a series of figures: the GMV of e-commerce in the first half of 2026 reached 2.73 billion yuan, a year-on-year increase of about 72%; the compound annual growth rate over three years was as high as 141%; and there were 432 online stores. Breaking this down by platform, Tmall grew by 99%, Douyin by 96%, Vipshop by 50%, and JD by 56%almost all main battlegrounds were expanding rapidly. Even more convincing was the external spillover of brand power. The 618 shopping festival contributed a GMV of 570 million yuan, with live-streaming contributing approximately 190 million yuan; the brand's audience asset expanded from 39 million to 75 million; in the Vipshop channel, OEDFF ranked among the top three, while COSMO LADY ranked in the top six in both Douyin and Vipshop (a rise of six places), and in the top five for JD in women's intimate apparel. The live streaming rooms of top influencers Chen Sanfei (45.55 million followers) and Mr. Dong (37.61 million followers) became COSMO LADY's sharpest customer acquisition tools. "Last year, the GMV for the first half was 1.6 billion, and for the second half 2.7 billion, which is about a 1.6 times relationship." COSMO LADY Chairman and CEO Zheng Yaonan drew a clear curve, This year, the GMV for the first half is 2.73 billion, so our target for the second half is approximately 4.3 billion, also about 1.6 times. He expressed "quite confident" regarding the target of 7 billion yuan GMV for the whole year. Looking further ahead, the company is aiming for 10 billion to 13 billion in 2027 and 2028. The significance of this curve far surpasses a mere sales number. Zheng Yaonan stated that if successfully achieved, COSMO LADY will "return to one of the top three positions in the national intimate apparel e-commerce sector." Supporting this goal is a structural advantage that competitors find difficult to replicate: COSMO LADY has both its core supply chain and an offline store networkthis is a moat that pure e-commerce brands do not possess and is precisely why e-commerce collaborative clients are willing to "switch from other brands." Of course, skepticism also followed. An analyst on-site probed: would excessive reliance on online sales lead to uncontrolled expense ratios? The management's response was that online service fee income can be converted into segment profit, requiring deductions for personnel, subsidies, and marketing costs, while the profit contributions from online and offline have roughly become equivalent. Under the premise of controllable sell-out rates, this growth curve is healthy. Inventory, Supply Chain, and the Gamble on "Quality Competition" If e-commerce is the growth engine, inventory is the sword of Damocles hanging over traditional retail. COSMO LADYs response relieved those present. At the end of the first half, COSMO LADY had total inventory of 741 million yuan, with old stock (pre-2024) having decreased by about 81 million yuan year-on-year, accounting for 21% (down from 35%); new goods from 2026 accounted for 60%If we include goods from 2025, the overall would be around 80%, noted CFO and Board Secretary Cai Weixuan. More interesting than the inventory numbers is a strategic shift. In the face of the industrys entrapment in low-price competition, Zheng Yaonan made a clear judgment: If we follow suit in low-price competition, theres no way forward. His solution is a "dual drive of product innovation and brand investment"including Canada Goose down insulation clothing, New Zealand milk cotton children's series, functional yarns, and partnerships with Suzhou embroidery and Shujin for intangible cultural heritagepushing up the average transaction value. For instance, the price of the milk cotton childrens series was raised from the previous 39-59 yuan to 119-130 yuan, and the fear of poor sales did not materialize; instead, it drove an overall upgrade in product structure. On the other hand, "pure cotton household items" are becoming the second growth curve. In the first half, their performance accounted for about 7% of the overall market, with a year-on-year increase of approximately 45%. Zheng Yaonan attributed its success to scenario-based innovation: aromatherapy, children's reading areas, and pet apparel, allowing mothers to "free their hands" and shop at their leisure; member contribution rate reached 83.8%, with a repurchase rate of 32.9%. Shopping centers are very willing to allocate the second floor or first-floor locations to us, rather than placing us in traditional intimate apparel sections. This shift in channel status often speaks more than single-store data. The increase in gross margin is the most direct annotation of this transformation. Amid rising costs of raw materials such as cotton and higher costs of petroleum derivatives, COSMO LADY's main business gross margin defied the trend, benefitting from a higher proportion of high-margin service fees and the shared cost pressure with its supply chain. As for expenses, selling and marketing expenses decreased year-on-year by 2.2% to 512 million yuan, and general administrative expenses fell by about 5.6% to over 75 million yuan"In the past two or three years, administrative expenses have been on a downward trend, which is a true reflection of the company's precise management. The Valuation Puzzle: Is the Market Wrong, or is the Time Not Yet Right? Inevitably, the question pointed to the capital market. In the A-share market, Aimer Co., Ltd. (603511.SH) reported revenue of 1.575 billion yuan (-1.42%) in the first half, with a net profit of 129 million yuan (+21.54%), and a gross margin of 67.41%; Shenzhen Huijie Group (002763.SZ) had revenue of 1.527 billion yuan (-2.64%) and net profit of 138 million yuan (+15.06%), with a gross margin of 69.42%. In the Hong Kong market, EMBRY HOLDINGS (01388.HK) boasts a gross margin as high as 71.8%, yet recorded a loss of 48.72 million Hong Kong dollars; REGINA MIRACLE (02199.HK) has a gross margin of 22.53%, with a net profit margin of only 3.67%. On this table, COSMO LADY's 51.4% gross margin is not the highest, but it has a unique distinction: it is the only pure brand retailer with a gross margin that has risen against the trend and positive net profit growth. A-share peers have higher gross margins, but reported negative revenue growth, relying on cost control to generate profits; Anlifang has the highest gross margin but continues to struggle on the brink of losses. More importantly, theres the valuation: COSMO LADY's current stock price is 0.29 Hong Kong dollars (as of August 28 close), with a market capitalization of 664 million Hong Kong dollars; the net asset value per share is 0.97 yuan, giving it a price-to-book ratio of less than 0.3 times; based on the annualized net profit for the first half, the price-to-earnings ratio is approximately 5 times. The company has 485 million yuan in cash and cash equivalents, maintaining a net cash position. "Our stock is undervalued." A rare direct statement from management at the performance meeting, noting that over the past six months, company directors and senior executives have repurchased more than 10 million shares. As the performance meeting drew to a close, the night had already fallen in Hong Kong, the lights still shining, reflecting the core narrative of COSMO LADY's mid-year performance meeting in 2026: actively cutting away "bloated" income from logistics and industrial parks, regaining focus on the core intimate apparel business; trading the e-commerce collaborative model for an increase in market share and gross margin; and betting on "quality competition" amid the industrys low-price rabbit hole, channeling costs towards the front end of branding and product. The validation of this logic hinges on two matters: whether the target of 4.3 billion GMV for the second half can be achieved as scheduled, and whether the gross margin can stabilize above 50% for the whole of 2026. If both are achieved, COSMO LADY at a 0.28 times PB may find itself at the beginning of a valuation correctionnot because it will grow larger, but because the market will eventually realize that it has become leaner, more profitable, and more trustworthy. Conversely, if the marginal cost of online growth spirals out of control and the old stock depletion experiences repeated setbacks, then today's low valuation may simply be a rational pricing of its real predicament. The answer lies in the next two halves.